Deficits as Far as the Eye Can see

Since 1962 through 2020 and projected through 2022, the US has had a government deficit every year except during the Nixon years 1969 to 1973. 

The table shows revenues, outlays, deficits, and total government debt since 1962*. 

Including the Nixon presidential years (1969 to 1973) does little to affect the notion that the US government has yearly budget deficits.  From 1962 through today we have a string of annual government deficits sans the Nixon years. That's roughly six decades of deficits. 

An annual government deficit means the government spent more in that year than it received in tax revenues. So what? So what is that the government incurs a debt in each of those years. In order to spend $5.44 trillion in 2022 it raised taxes of $4.39 trillion. Obviously the revenues did not cover the whole amount of spending. What we call the national government deficit is the $1.154 trillion difference between spending and tax revenues. That's how much we had to borrow for just that one year. 

How does one spend more than they earn? Tuna knocks over 7/11s. The rest of us have to borrow. Thus a national deficit in 2022 means the government has to borrow $1.154 trillion in 2022. The amount of new debt that year gets added to the existing or old debt. Note that if you have a deficit in one year, you cannot pay down the existing accumulated debt by even one penny.

It is worth pointing out that when the government snaps up that $1.154 trillion in the credit markets, there is less money available for the you, me, and General Motors. Economics say we get "crowded out" by the government. The government has some very large elbows and the rest of us get less. Of course, we don't know that the game is on and so the act of the government and the rest of us trying to borrow all that money sends interest rates up. Between rising interest rates and crowding out, the private sector gets knocked around by those large government elbows. 

Looking at the next to last column (annual deficits) you notice that the debt (last column) had to grow every year -- except the years 1969  to 1973 when we had annual budget surpluses. The last column shows you the accumulated debt of the US government. It started at $248 million in 1962. It has grown and grown to over $24 trillion by 2022.  That's quite an increase. 

Again, you might say so what? After all, the government is not the Tuna and is not even Donald Trump or Bill Gates. You might imagine that the government does not have to pay its debts. No big deal. Have big and bigger debts. 

Well, it does have to pay. Those debts are evidenced by bonds issued. If you hold one of those bonds you fully expect the government to pay you annual interest and then the principal. Just because it is the government does not mean it does not have to pay its debts. The bigger the debt gets, the more concern we have that the government might not pay. 

That's where it gets sticky. If the debt gets too large and we worry the government might not pay, then that creates some problems. For example, if the government tries to sell bonds and we decide not to buy them, the market price of the bonds falls and the market rate of return rises. That influences other interest rates and pretty soon the rise in interest rates hurts borrowing and spending. Higher interest rates adversely affect the buying of houses, cars, and many other goods and services.

And that's not the whole story. You might note that the government controls the supply of money. The Fed can just crank out a bunch of $100 bills and buy those pesky bonds. There today, gone tomorrow, replaced by money. That helps to keep those interest rates down and the government slides on down the road with its huge debt. 

Well, that all works pretty well until all that liquid wealth -- the money -- burns a hole in our national pockets and we start spending like the Tuna at a Macy's Christmas sale... and that starts to bid up the prices of everything from tuna salad to a 42 ounce T-bone. 

It all sounds kind of cool until you realize that there is no reason to let the national debt grow and grow and grow. Grown-up congressmen are allowed to say no to additional spending. They can also raise taxes enough to cover the extra spending. Sadly, the ones we have had lately don't seem to have the sense or the stomach to do what's right. We should tell them to hit the road. 

*To economize on data points in the table, I omitted the years in between the years 1962 and 1972, 1972 and 1982, 1982 and 1992, 1992 and 2002, 2002 and 2112. 

Time to Whip Up a Little Voodoo?

Last week I mentioned supply-side economics as one solution to the tradeoff between inflation and unemployment. I promised to say more about supply-side policy this week.

If your memory is as bad as mine, it won't hurt either of us to review a bit here. Thanks to a guy named John Maynard Keynes and a Paul Krugman band of Keynesians, the dominant view of the economy focuses on spending or what we often refer to as demand for goods and services. The essence of demand-side macroeconomics is that policymakers can attack only one problem at a time. 

If they want to reduce the unemployment rate, they use demand-side (AD) policy to ramp up spending. If they want to reduce the inflation rate, they do the opposite. Last week I lamented the situation when both inflation and unemployment are too high. What can the policymaker do then? Attacking inflation with AD policy makes inflation worse. Trying to reduce unemployment makes inflation worse.  

What a dilemma! Talk about being between a rock and a hard place. Last week I offered supply-side (AS) economic policy as a way out of this dilemma. Today I have to back up and explain my point. 

Let's start with the criticism of supply-side economics. Famous economists labelled it "Voodoo Economics". You have to admit, that's pretty bad. Can you imagine the President telling the voters that he is going to use Voodoo Economics to solve our problems? 

Why call it Voodoo? Maybe snake oil would be better? No matter what you call it, the communication is that there is no theory or no history to support the notion of a policy that radically differs from the usual AD policy. If it ain't D it ain't nothing. We know D. It might not be perfect but we know it.

So what's the big difference? The difference stems from an understanding of basic economics. Basic economics posits that we can explain price and quantity sold with a simple model that focuses on supply and demand. Think of two very different situations.

    If everyone wants more candy and we express that by going to stores and buying more candy, this is the kind of situation that could lead to a shortage and eventually a rise in prices and output. 

    If instead the key change is that firms decide that this March is a wonderful time to supply more candy to stores, then we might have a glut of candy and an ensuing drop in price and increase in quantity sold. 

Clearly, economics says that a rise in supply has effects that are very different from a rise in demand. 

Back to macro. From the beginning of macroeconomic thinking we thought of AD as the driver of the economy. Then someone came along and started talking about AS. Wow. Crazy. But why not? If we can speak about supply in microeconomic markets, why can't we use the same ideas in macro?

There's not a lot more to say. If the current situation of the economy is high inflation AND high unemployment, AD policy is not ideal. The tradeoffs can be very painful. Why not try AS policy? Why not have a policy designed to encourage and motivate firms to produce more? If that policy works, then we will observe firms bringing more output of goods and services to the marketplace. The glut should heal the rising inflation rate while simultaneously reducing unemployment. No tradeoff there!

How do we do this magic? We focus on the AS curve. Two basic forces will increase AS -- lower business costs and higher business productivity. With that logical basis we focus our policy tools away from trying to get people to spend more and instead focus on ways to use policy tools to limit business costs and raise business productivity. 

What are business costs? Easy -- the wage rate, taxes on labor, the cost of capital which include prices of plant and equipment, costs imposed by government regulations, and other costs incurred by companies.

What is business productivity? Business productivity rises when a firm does anything that makes it possible to produce more output with the same amount of inputs. Giving workers better machines could do that. So could better training.  Better business practices would have the same effects.  

Notice the stark difference between AD and AS policy. AS policy might be less well known but in times when AD policy is hampered by tradeoffs, it might not be a bad time to whip up a little Voodoo. 

Recession or Inflation?

On Match 15 I was doing my usual thing. I was reading the Wall Street Journal online and perusing the New York Times free online summary. No, I will not pay for a full subscription to the NYT. That would be like me ordering Bananas Foster when I am allergic to bananas. 

Anyway, I loved the stark contrast. While I could not read Paul Krugman's whole article in the NYT, its title was enough to send the message  -- "We can avoid a Putin recession in the U.S. — if the Federal Reserve doesn't overreact to rising oil prices." Got it? The Fed should not be worried about rising oil prices. It should not cause a recession. It should not tighten monetary policy.

Meanwhile, the WSJ was writing the opposite. "Let's Start Raising Interest Rates" was the title their article. I was able to read that article. 

It is worth writing about this here since this is a classic battle between left and right macroeconomics. The right wants to put out inflation flames. The left worries more about a recession. 

If you know me at all, you know that I side with the righties. I think history is on my side but let's go through this one more time. Krugman is right on one score. Monetary or macro policy is not effective against rising  prices of one or even a few commodities. Macroeconomics teaches the difference between problems that start from microeconomic sources and those that are macro. 

If prices of cigars rise, this is because there is an imbalance between the supply and demand for cigars. We don't bother monetary policy about that. Using monetary policy to attack the price increases of cigars or energy, might be effective but it is overkill. 

So Krugman is right when he says monetary policy is not the best tool to fight energy prices. But as usual, Paul Krugman can be right about one thing but wrong about the right thing. Krugman's past reveals that his real passion is about unemployment rising in a recession. He loves using inflation as his cover, but that's just a game. Ask Paul Krugman. He is more concerned about unemployment. That's his goal. 

But that is exactly the problem. How can one argue about reducing the misery caused by high and rising unemployment? Anyone who ever had a heart (isn't that the words to a song?) has to care and do something about unemployment. No argument there. 

The issue is what to do about a recession and rising unemployment -- especially during a time period when inflation is rising. Yikes -- two problems -- rising inflation AND rising unemployment! 

That's the quagmire. Its a deep quagmire because the usual tools of macroeconomic policy will improve one at the expense of the other. Krugman wants lower unemployment. Good man! But wait -- if we use monetary or fiscal policy to expand spending in the economy that will raise output and employment. Case closed. Nope. 

If there is already high and/or rising inflation and you use policy to expand spending even more, then it will make inflation go higher. Cool. Employment is higher and the cost you pay is higher inflation. 

That's bad enough since no one loves paying higher prices, but the story doesn't end there. Higher inflation and higher expected future inflation drive up wages and many other costs paid by companies. In other words, higher inflation will lead to conditions of lower profits and firms will cut back. They will cut back on output and employment because conditions are poor for earning profits. Got it? Fighting unemployment means unemployment goes down and then it goes back up. Yikes. It's a policy boomerang. 

What did Krugman say about the boomerang in his recent article? Nada. He wants to help folks by expanding the economy and jobs. But what he doesn't say is that doing that in inflationary times just won't work. I won't bore you with the 1970s stagflations -- but history is there for you, me, and Paul to read. 

What do we do when inflation and unemployment are increasing at the same time? First, realize that the idiots running our national policy never should have got us into that place to begin with. Second, fight the inflation, tolerate rising unemployment, and then watch as both problems improve. Third, use something called supply-side policy. I am at my word limit so I won't open up the supply-side can of worms today. 

The Age of Information

Information, like technology and fried chicken, is loveable on the surface. When we read that we are in an age of information, we feel good and we feel proud. We feel modern and advanced and we feel smart. Information is valuable. Like the fried chicken, a big tub of information makes us feel like we have more command over our surroundings. It makes us smarter than our parents. It makes us more productive than those without so much information. 

I could go on. But my point today is that, like friend chicken, you can have too much of a good thing. And that includes too much information. I don't know about you but I shy away from picking up a newspaper, reading an online news source, listening to a radio news telecast or watching the TV news. Why? Because it is boring. It is boring not because of the color of the show or the beauty of the news purveyor. And the truth is that the stories are important. 

So what's the rub? The problem is that they don't know when the story is covered.  And they seem to want to drag out the same story for days if not months at a time. It's as if the press decided to cover a basketball game minute by minute. Imagine them writing a story on Monday that had the Seattle Superconics ahead 2-0 on a layup. And then they wrote an article on Tuesday when they went ahead by 4 points. Boring!

Think about the coverage you have seen lately. It doesn't matter if the topic was Covid or Russia or a missile launched by North Korea. Count the number of articles/stories that came out in the last two weeks about Russia and Ukraine. Could you really even count them? How many of those stories were identical? The first article might have been interesting and informative. But after thousands of similar articles,  I feel beat up by the process. 

I give them a break. I assume that the subsequent articles have something new or interesting or important. So I get sucked in. Read another one. But eventually I see that the story never changes. It is the same points and facts made over and over and over. What has really changed in the last weeks? Putin invaded Ukraine. Ukraine is a sovereign nation. People are dying in Ukraine. The world is unhappy and wants to do something about it. The same story over and over and over. 

What am I trying to change here? Do I want the government to throttle the press? Do I want the press to act responsibly and only print what is new? I don't think so. The marketplace ought to be able to handle this problem if other people feel as strongly as I do. A market can't know how to react responsibly to garbage information unless we start talking about it. Do other people feel the same way as me? 

It's not only that we are getting useless redundant information, Some news is being left out or crowded out by Russia and Covid. The press seems happy relaying another story about Russia or Putin or global warming when they could be writing more articles about the weather, low-rise jeans, suburban crime, Octogenarian sex, and the latest diet crazes. 

Inflation Ain't so Bad?

Happy Tuesday.

I try not to think about inflation too much. While it is painful to pay higher prices for many things at the store, we exaggerate the impacts when we read the announcements of the national figures. The Consumer Price Index* recently rose at a rate of 0.6% in the month of January 2022. If you measure the change over a whole year,  from January of 2021 to January of 2022, the inflation rate of the CPI was 7.5%. The rate was 6% over the year measured by the PCE deflator* which has smaller weights for highly volatile food and energy prices. 

The national inflation measures apply to a large random sample of people and what they are buying. If your buying habits are different from that group, then your personal inflation rate differs from the published one. If you are a smart, savvy shopper, you might do much better than the published indices. Energy and prices at the pump are clearly alarming. But do I really need to ride around alone in my large gas-hog SUV when I could trade it in on something that makes more sense when a gallon of gas costs as much as a gallon of Jack Daniels?   

Another thing is that you buy some things whose prices are not changing. For example, if you have a fixed rate mortgage, your mortgage payment does not go up when interest rates or housing prices rise. If you buy other things on a long-term contract, those prices don't rise either. That's another way of saying that your CPI doesn't rise as much as the nation's.

Finally, is the issue of dollars and cents. Suppose you spend $3,000 per month on things whose prices rise. At 2% inflation, prices go up by $60. At 6% inflation, prices go up by $180. The difference of $120 might seem high but maybe not. It is not welcome but it won't exactly crush you. 

One mitigating factor is how your income or your wages react to inflation. If you are able to negotiate a higher wage or if some of your income is automatically indexed to inflation, then the impact of the price change alone is less. If your income rises by 3% when prices are rising by 6%, your purchasing power falls by 3%. That's not appreciated, but a 3% reduction beats the 6% decline. 

That's my story about inflation. Inflation isn't nice but maybe it is not as horrible as it seems.

*The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. An alternative measure of national prices is the deflator for personal consumption expenditures. 

Inflation Scares

We have all heard that inflation is getting worse. The number being quoted measures changes in the CPI during 2022 -- from December of 2020 to December of 2021 the rate of change of prices was about 7.5%. That number makes heads spin. 

It has been decades since we have had inflation so high. In the year before -- 2019 to 2020 -- the inflation rate was 1.4%. Clearly in 2021 something was going on.

Most of the analysis I have seen is not very curious about these increases. My first notion was that maybe it all happened in one month. And it is true that the annualized inflation rate in one month was 10.1%. But that wasn't enough to make the whole year's rate of inflation go from 1.4% one year to 7.5% the next. 

So I was curious. If it had to do with Covid then maybe we had high inflation in most months. So I decided to look at all the months of 2021 to see what the data had to say.

    Jan/Feb averaged 5.8%

    March to June averaged 9.8%

    July to September was 3.8%

    October to December 6.5%

The highest months were March, April, May, June, and October. They ranged from 9% to 11%.

The rest of the months the inflation rate ranged from a low of 2.5% to a high of 6.6%. 

These numbers have already been adjusted for regular seasonal patterns. So we can't blame the differences on regular seasonal patterns. 

But it does make us wonder about 2021 and the future. The worst inflation of 2021 came from March to June. But that was followed by a quarter of much lower inflation. Inflation then increased in the final quarter of 2021 but did not reach previous highs. 

Maybe the worse is over. Maybe not. 

While this kind of analysis is not perfect and it proves nothing -- I enjoy doing it because the press and the government are so bad at breaking down the news. They would rather scare us with screaming about the worse inflation in decades than take a honest look at what the data says. 

The National Debt

The government recently announced that the national debt reached $30 trillion.  It now stands at 128% of the economy. Yes, our national debt is larger than what we earn each year. Wow. You would think that they would be so ashamed that they would somehow hide that obscene accomplishment. I guess its hard to hide such things. That debt amounts to about $90,000 for each person and $240,000 per tax payer.

Equally troubling is that the $30 trillion announcement had almost no effect. If Biden burps at the dinner table the stock market falls.  If the inflation rate rises by a tenth of a point, interest rates skyrocket. But debt reaches $30 trillion. Ho hum, honey pass the mustard please. 

I read several articles announcing this new debt number and came away from that experience with a tummy ache. Lots of angles here and its not really an all-good or all-evil story. 

Take for example, the idea that the debt is $240,000 per tax payer. My first reaction is wow -- huge. But that reaction stems from the illogic of comparing a stock with a flow. The debt is a stock, an accumulation of what we owe. The flow is what we earn each year. We have a lot of years, if we so chose, to earn income and pay off the debt. 

We do that as households every day. We borrow a ton of money for our nice new house or our sleek cool Jaguar and then we spend 30 years paying it off. We might only make $50k per year but in 30 years we can pay off a pretty big chunk of debt. If our national debt is $240,000 per taxpayer, note that we have a lot of years to pay. 

Maybe that's good or not good. Take the case of the house purchase. Hoot might buy a really cool house and doesn't mind paying a big chunk of his income every year. Kiltie might buy a less worthy house and feel like he got scammed. It's the same with the national debt. What are we doing with all that debt? Are we throwing it down a hole or are we using it to our great advantage?

Hmm. Answering that question is full of politics.  It all depends on what you think the government ought to do with our money. Danny wants us to spend it all on national defense and infrastructure. Jason wants us to make incomes more equal. Nolan wants more spending on Kraft macaroni and cheese. 

It also depends on the realities of the impacts. If we spend it on national defense and we lose the next war, then it seems like we could have used that money better. If we spend it on welfare and poverty worsens, then we wonder if we are wasting the people's money. 

Government always has the choice as to spend the money on donuts or steel. Donuts are a consumption item. You spend the money, you eat the donut, you get a sugar high, and then that's about it. The government could instead buy steel. Steel is an example of a capital good. The essential characteristic of the steel is that it lasts and it can lead to even more output. The extra steel lets you build a building. The building might house a donut machine and produce donuts for years to come. Steel or donuts? Consumption or investment?

Finally, regardless the above points, there must be a limit to what is prudential to borrow. Even if you use the proceeds for good things -- one can still borrow too much. Recall that you have to pay it back. If I buy a $10 million dollar house and I live off my Social Security benefit, that is not going to work. 

Surely the above does not cover the whole waterfront. But it does support what I said at the outset. How much national debt we can tolerate is not any easy question. Some debt is good. Other debt is not. Knowing what is the right amount is complicated. But I will stick my neck out and say that we could live in the USA with a national debt less than $30 trillion. 

Paul Krugman, Inflation, and Gentle Tightening

This was Krugman's latest headline. The Fed Should Raise Interest Rates, but Gently. Tightening is obviously necessary but getting it right calls for caution, flexibility and humility.

This is like telling your kids that you are going to lose weight but only one pound per week. Your kids know you and they realize that (a) this is a total lie, (b) this is impossible, or (3) you are in a food coma and don't know what you are saying.

Why do I say this? Largely because I never lose weight for more than a day, and because Paul Krugman doesn't care a wit about inflation -- if it means we might have to trade off some employment/output to reduce the rate of inflation.

It sounds like a cruel thing to say but history proves the point.  I have lost weight at times but apparently I care more about eating that 16 ounce T-bone than about moving down to a size 36. As for Krugman it sounds really good to stand against rising inflation but the truth is that he cares more about other things -- things that reliably pump up the government's budget, aggregate demand and ultimately inflation. 

Look at the title and read some of the article. He uses the word gently. Then he uses words like caution, flexibility, and humility.

Really? What do those modifiers mean to you? Honey -- go on a diet again and this time do it gently. Really?  Have great humility as you try to shed that half of a pound today. Come on folks -- the words tell the truth. If the slightest thing starts to go wrong as we apply pressure against inflation -- GAME OVER. Be more gentle honey. 

Welcome to the real world. You sit on the sea saw and your friend moves up. You get off and your friend moves down. Period. Unless you have a rubber sea saw.

Please ask Professor Krugman for all the episodes -- anywhere in the world -- where policymakers have been able to gently, gradually, and with caution, flexibility and humility been able to reduce the inflation rate. Then ask him how many times governments have waited while inflation soared and then created a recession with their too much too late policies. 

Why does it usually work out this way? The answer is simple.

Waiting is often better than doing. Honey, I am pretty sure my leg is not broken. Let's wait a while before I have the doctor look at it. You know that if the doctor thinks you have a broken bone he is going to give you pain and suffering. Put it off a while. So what if you can't walk. Maybe it will feel better tomorrow. 

Krugman is the head cheerleader for the liberal progressive wing. He knows that the right policy will be painful right away. He knows that the reason for the inflation is probably because our friends in the government spent too much of our money. Maybe they spent too much on defense. Maybe too much on poverty. Maybe too much on whatever. 

If government spending too much on these things and the Fed monetizing these debts is the cause -- then the solution is to reverse them. Ouch. Higher taxes? Lower spending? 

Krugman wants to sound reasonable with his words. But he knows that if a hammer to the head causes a headache -- then you should remove the hammer. That's it. Words like gentle, caution, and humility only are meant to put things off. Go ahead and hit yourself in the head with hammer -- but do it more gently. 

The Fed is Raising Interest Rates

Sometimes I forget when reading articles about the Fed and monetary policy that I spent years figuring out Fedspeak. Lately the news has been about reports that the Fed will soon raise interest rates. I imagined the Fed telling each bank to raise its rate on savings accounts. But that's not really how it goes. So I decided I would put on my teacher hat and explain what I think all this means.

What is the Fed? Why do we expect them to raise interest rates? What are they doing? How are they doing it? Why are they doing it?  How will it work out? How does all this affect the stock market? Whew. Lots of questions. 

The Fed is short for Federal Reserve. The Fed is an organization that is part of the government's national policy making institutions. These policy decisions come out of the Fed's Open Market Committee. That policy making committee consists of the Governors of the Fed and the Presidents of the Fed district banks. Those folks meet regularly to decide on Fed policy.

Fed policy in the real world has two basic goals. The first is to keep the economy humming or at least keep it out of recessions. The second is to create a stable inflationary environment with the inflation rate of goods and services rising at around 2% per year. It has a hard time with these two goals because sometimes making progress on one automatically causes problems with the other. So they have to walk a fine path so as to make economic growth strong enough and inflation low and stable. 

Often the Fed's decisions and its goals are framed using words like money growth and interest rates. Notice I used the word "goals".  On a day to day basis, the Fed does not set interest rates. It is more proper to say that they try to influence interest rates. There is much confusion when people imagine the Fed moving a dial for interest rates. Or telling bankers what interest rate to charge.

This might sound crazy, but the Fed influences interest rates because they buy and sell government bonds. They do not write down an interest rate on a bond. The US Treasury does that. What the Fed really does is to trade government bonds in bond markets as a way to change the market value of these bonds.. 

When the Fed decides to buy a lot of government bonds, they buy the bonds with newly created money. Boring. Create money. Really? Yes they create it at will. Wowee -- makes me think of Scrooge McDuck playing in his vault.

Anyway, back at the vault. The Fed creates money and then uses it to buy bonds. If they create enough demand for bonds, this causes the price of the bonds to rise and the interest rate on those bonds to fall. Aha. The interest rate on the bonds is written in ink -- but if the market prices the bonds higher, then the rate expressed as a percent of the market price of bonds falls. Suppose the bond says 4% on it. The more you pay for that bond and for the stated 4%, the lower return you get. 

Don't moan. The Fed does not tell banks what interest rate to charge. But the Fed does influence a broad swatch of interest rates as it buys and sells government bonds. 

This gets us back to the Fed's goal. If they want a stronger economy they will buy bonds as a means to reduce interest rates and to persuade people to buy more goods and services at those lower rates. If the Fed wants to reduce the inflation rate, then it does the opposite. It will sell bonds as a means to raise interest rates and persuade people to purchase less goods and services. 

I see you are starting to nod off. I did my best to write about a tough topic. I hope it helped you understand the Fed and monetary policy a little better. If not, there is always a sweet walk by the lake with your honey.  

Janet and the Wizard of Oz

This stuff gets funnier all the time. Janet Yellen reminds me of the Wizard of Oz. 

Remember the good old days when words had meaning? For example, government policies could be of several kinds. 

Aggregate demand policy was all about stimulating people's desire to spend. Poverty policy was aimed at reducing poverty. Energy policy was all about promoting more energy while environmental policy attempted to undo harm to the environment. Supply-side policy attempted to shift the nation's supply curve, usually through lower tax rates that created more incentive for people to work and innovate. 

It was all pretty clear. And then the Wizard, I mean Janet Yellen comes along and obscures everything. The title of the article in the Wall Street Journal was Janet Yellen Views Biden Policies as Modernized Supply-Side Economics: In a Speech to the World Economic Forum, Treasury Secretary says the White House is aiming to increase labor supply and boost worker productivity. 

Modernized supply-side economics? What does "modernized" mean? Is it not enough to say they are trying supply-side policy? Maybe not. That would be misleading. The Biden/Yellen supply-side policies have as much to do with supply-side as I have to do with dancing tights. If what they are trying to say is that their supply-side policies are different than the past ones -- then for sure that fits. Their modern supply-side policies are a very long way from what we tried in the 1970s. 

Consider what they include under the umbrella of supply-side. 

    Social programs such as paid family leave, child care, education, and infrastructure.

    Programs for climate change. 

    A global corporate minimum tax. 

The common phrase employed by Yellen for these programs is that they increase labor supply, and or raise productivity while reducing inequality. 

Old style programs that reduced taxes on capital and/or deregulated industries are old fashioned and don't work, according to Yellen. What she really means is that if they worked they might have tilted the distribution of income and therefore they are not part of her modern approach. 

Clearly the bottom line for Yellen is not that they are supply-side policies. The bottom line is that they are part of a plan to redistribute income. I agree that some of the programs she mentions might have supply-side effects, but clearly they are not thought of in those terms and there is little to no historical data or experience to suggest that they do. 

Infrastructure sounds like typical supply-side policy. But even with that one -- she is very clear it has to be infrastructure that makes incomes more equal. Let's build a new subway. But make sure we build it in such a way that incomes are made more equal. No equality -- no subway! Maybe subway builders can't do that. After all, they succeed by making good subways. Not by making incomes more equal. 

It sounds good to say that subsidizing childcare is going to make it easier for the family to provide more labor hours to the economy. But why not tell the truth? We don't know. What Yellen does know is that this is a typical welfare transfer to help people at the low end of the income distribution. Maybe she thinks it sounds cool to pretend that she cares about the supply-side of the economy. But we all know the truth. She is what she always was. She is a part of the Biden administration whose goals are driven by global warming and income distribution. Tell it like it is Janet.

Too Little Too Late?

I got on the scale. Yep, I weighed too much. So I got on the scale again in a few weeks and yikes -- I weighed even more. I swore then that I would change. I would only eat green beans and asparagus spears for a month, maybe longer. Well, I didn't really do that and soon my pants were so tight that I could hardly dance. Now it is even more painful. It's even harder to go on a diet when you are psychologically and physically hurting. What a mess!

That's my analogy for the Fed. The leader of the Fed, Mr Powell, and several of his directors have been quite public lately about their intention to reduce inflation. When inflation was building and possibly manageable, they said little. Like the common cold, they said that price increases were temporary. No need to worry our pretty little heads about a rising inflation rate. Let's keep interest rates near zero. 

Well, that was then and now we are reading just the opposite. Inflation is heading towards 7%. Inflation did not go away. It got much worse. Now workers want higher wages. Financial firms want higher interest rates. Business costs are rising and all that spells even higher inflation as firms pass along higher costs into higher prices. 

"Don't fire until you see the whites of their eyes!" That was bad advice then and is bad advice now. Waiting until the enemy is on top of you may save a little ammunition but it clearly makes the fight harder. In the 1970s we learned about the pernicious effects of something we called inflation expectations. Who cares what started the inflation rate rising -- as people expect higher inflation they act in ways that create even higher inflation. It becomes perpetually self-sustaining.

At this point we have two problems. First are the effects of the actual inflation. Second is that once inflation expectations are increasing -- how does the Fed reverse that psychology? If a person fails at life, that's a problem. If that causes the person to go into a depression, then that's a second and perhaps even more difficult problem. 

The Fed had plenty of chances to nip inflation in the bud. Now that they have waited so long to do something, they have to deal with inflation expectations. History suggests this can be a bloody process. How does the Fed wipe out a psychological expectation after they and their friends in Congress have created historically high government deficits and monetary increases? How? They can't. Period. 

Looking back at the 1970s when I was just a kid and Tuna was swimming in Tuna Pampers, they let inflation get going. It steadily increased for a whole decade in the 1960s before they decided to do something. Nixon got the brilliant idea to have wage and price controls -- government edicts over wages and prices. That didn't work. And damned if it didn't lead to smaller Hershey Bars. By the end of the 1960s with inflation soaring, the Fed finally cut back. Interest rates soared and the economy went into a recession. We ended up having two recessions by 1975 before all was said and done. 

Why don't these fools in Washington know about all that? Why do they insist on not learning from history? Why do they do nothing but talk? Still today they talk and do nothing. Sure they will finally do something but as in the 1970s it will be too little too late....and then they will find themselves in a no-win situation. Then they might get more aggressive as inflation soars. We called that no win situation back then "stagflation". It meant inflation kept rising during the recession. Ugh.

Here we go again. 

The Big Lie

End of Democracy?

A bunch of political hacks and thugs broke windows and doors and created a new page in the history books. It was horrible and scary and wrong. But did it really signal an end to democracy? Why can't politicians just say the truth? The end of democracy? A significant threat to democracy? I don't think so. 

Does anyone really think that even in the chaos that resided in our Congress, that the folks involved in the invasion were significant? Were organized? Had a plan to take over the government? We are now more than a year from that event and yet the same talking heads repeat louder and louder that democracy was in jeopardy. Even our President repeats this outright lie.

Why do I use the word lie? Because he and his buddies know that democracy was not in jeopardy. And I use the word here only because that's the word that they use. They say the big lie is the claim that the election was fraudulent. I agree. That was a whopper. But to retort and say that democracy was in jeopardy is a pretty big stretch of the imagination. 

Only a bunch of ideologues could have come to that conclusion. Or maybe what they really mean is that democracy only exists when Democrats have their way? 

Yes, people broke windows and scared the crap out of a bunch of elected officials. Did it look like they were going to stay and impose a new government? Did they plant a new flag in Pelosi's chair? Did they read aloud their new constitution? Did the government of the people disappear?

Nope none of that. What happened is that a bunch of angry and violent and lawless people tried to make a statement. The statement, I think, is that that there might have been voting irregularities. Voting irregularities do threaten democracy. Voting irregularities have happened before. It's possible. 

As I said above, I don't think there were significant irregularities. But what you saw vividly is that if the wrong party brings that point  up -- then those people are spreading the big lie. They screamed that democracy is threatened if someone talks about voting irregularities. I don't think so. What I think is that regardless of party, if someone believes there are voting problems -- then those people are standing up for democracy. They should stand up. They should accuse.

If they are wrong, then lets do what we used to do at Ponce de Leon Junior High School -- when they stand up then lets pull their pants off in front of everyone. A joking way to say it, but if someone alleges voting irregularities and they are wrong, then they should be punished severely. People should know in advance that we don't put up with those kinds of lies. We shouldn't be vigilantes. We should have laws and legal processes that can be enforced against this kind of despicable behavior. Give them an award if they are right. A jail term if wrong. 

What is democracy anyway? Is it really so fragile? Democracy means we have free elections. Democracy means we elect people who represent us. Those people enact laws to improve and safeguard our homeland. Democracy means all our votes are counted. It also means we have laws that govern who can vote and who cannot vote. Government should make sure we don't violate that trust and vote twice or somehow disturb the rights of others to freely vote once. 

We have a tradition of democracy. Nearly 250 years of democracy. I don't think it is too fragile. This is not Latvia or Cuba. Democracy was not threatened by a bunch of thugs in the streets. It was a lie to say that elections were rigged by Democrats. It was a lie to say that democracy was threatened by Republicans. 

Let's get together. Let's kiss and hug and be proud of the fact that we live in an incredibly terrific free nation. If you don't agree, then why not spend a little time in Ukraine or Cuba. Bon voyage. See how much you like those places. 

Covid and Employment -- Still off by 7 million workers

There have been many ways to measure the impacts of Covid on the US economy. We talk a lot about spending, supply chains, and inflation. But little has been said about employment. Employment is the basis of our economy and our feelings of wellbeing.  So I decided to take a look at employment at the national level. 

The Bureau of Labor Statistics publishes a lot of information on employment, I chose something they call total nonfarm employment. No offense to agricultural workers, but this measure seems to be the one most often cited. It comes out each month and tells you the number of people who are employed. The information comes from the business firms. 

I downloaded data from January of 2011 to November of 2021. In January of 2011 there were 131 million people employed in the US. By November of this year the number reached about 149 million. That's an increase of 18 million workers -- or about 14%. That amounts to increase of almost 2 million workers per year. Not bad. 

If you measure change from December to December of each year, it was typical for employment to grow by about 1.6%. In 2019 the growth was 1.3%. The highest growth rate before 2021 was 2.2%. Not a very exciting variable. We can count on employment to grow. Even the monthly growth rates are not very interesting. In the 8 years from 2011 to 2018 the lowest growth rate in one month was 0.3% -- this happened twice. The highest rate was 3.1%. That also happened twice. 

Snooze.

But then we hit 2020. In March, employment fell by 1.7 million jobs and then in April the decline was almost 20 million jobs. In one month there were 20 million less people employed.  Employment was at 130 million jobs on March of 2020. That's close to the employment level of 9 years before! Now that's news. 

By the end of 2020, employment crept back to 143 million and by the end of 2021 it was closing in on 149 million. That sounds pretty good. But at 149 million it was still 3 million below the peak rate of 152 million in December of 2019. 3 million is a lot of jobs lost. 

Clearly 2020 was a bad year for work. But notice that 2021 showed a lot of vigor. The increase in employment in the first half of 2020 was about 6% per month. The second half of 2021 has been good too but not as spectacular as the first six months. 

This numbers make me dizzy. But there is a story here. If we want to focus on employment, we see the very temporary effects that Covid has had on jobs. We are not yet back to previous peaks. But we aren't far off.  

That sounds pretty hopeful, but it doesn't hurt to think about where we might have been without Covid's interruptions. If employment had grown in 2020 and 2021 at previous rates -- say about 2 million jobs per year -- then the employment level at the end of 2021 might have been around 156 million. Todays' 149 million workers means we are off that mark by 7 million workers. 7 million workers as a percent of 156 million is about 5%. 

That sounds hopeful to me. But a lot depends on Delta, Omicron, and whatever comes next. 

The Glass is Mostly Empty, New York Times

I just read the daily poop (DP) from the New York Times. Each day the NYT writes a short news, but mostly opinion piece*. As a person who is pretty much politically neutral, I read it for fun and to support my belief that the NYT is one of several publications that profit from making us all a little less happy each day. In my case their goal is thwarted because it makes me happy to know that they are so transparent. Of course, they probably are pretty successful at stirring up a lot of pessimism. I guess pessimism sells papers. 

I read their DP on Friday, December 10th. Afterward I felt like stabbing myself in the eye with a bowl of oatmeal. I can't believe they get away with this stuff. 

The piece was motivated by a poll they quoted that found that only 35% of the population thinks the economy is good. Meanwhile 65% think their own finances are just corker dandy. Apparently most people think they are doing a lot better than their neighbors. Somehow, the NYT thinks that is horrible, so they wrote a whole piece about that. Seems to me that they should be happy. Would they rather take a poll and find out that most people think they are doing worse than their neighbors? 

The article is about Covid. I wonder how many negative articles they have written about Covid? The number infinity seems to be close to the reality. Remember the good old days when they used to write about murder and mayhem? 

In their attempt to make everything look horrible, they explain that Covid's impact on the economy is very broad and varied. In their own words, "

    Sure, some major statistics look good, and they reflect true economic strengths, including the state of families’ finances. But the economy is more than a household balance sheet; it is the combined experience of working, shopping and interacting in society.

With that bold statement, the NYT goes on and on about anything and everything they can think of that is bad or worse these days. And the implicit opinion is that while some macro statistics and personal finances are good, it is all that other stuff that matters the most. Gloom. The world is horrible. 

Whatever happened to Mary Poppins? What happened to the glass half-full? Nope. The NYT thinks the glass is pretty much empty. 

Of course, the NYT article never quotes a number to support their angst, except for the poll numbers described above. 

And worse than not quoting a number, they don't distinguish between trends of 2020 and those of 2021. They mention that social distancing makes us socially distant and makes us cry ourselves to sleep at night. While things were pretty uncomfortable in 2020, there have been some improvements in our discomforts and challenges. From this article you would never even guess that anything had improved since 2020. 

What is missing as well is some balanced view of human resilience. It doesn't help that the NYT constantly reminds us that things are always getting more horrible. But the truth is that we have been through horrible many times. The state of nature is that the lion is out there and it is going to eat us if we are not careful. And yes, Covid sucks dirty pond water. But World War II was pretty crappy too. 

As with Covid, we had different opinions about entering WWII (or WWI or Vietnam or Korea) and the effects it would have on us. But with WWII many supported the war effort and many communicated a positive and optimistic psychology. Let's win that war!

But we don't need to go to WWII to make this point. Take any given non-war day in the last 100 years and there is always a mixture of good and bad happening. Leave it to the NYT and you'd never know it because they will prefer to write about the bad stuff. 

Covid is terrible and we have made many sacrifices in our lives to try to win that war. I venture that the NYT is not helping in that regard. They would rather make money by stirring the pot than helping people adjust to an important and difficult challenge. They are a major part of the problem. If you tell people enough times that they are doing poorly -- pretty soon they will start to believe it and feel poorly. 

Poo on them and their DP. 

* nytdirect@nytimes.com

Alan Blinder Again

 

Alan Blinder (Princeton economics)* never gives up. He used to be a moderate -- that is, while he might have tended to the liberal side of macroeconomics, he was a good economist. One with a more conservative macro bent might disagree with Blinder, but finding the holes in his arguments was never easy. It was always very challenging to disagree with him.

But now, Blinder has crossed over to the far left side of the river and he makes it too easy to dismiss his articles. Since he is a famous Princeton economist, his words are published by the best periodicals. This time it was his nemesis the Wall Street Journal that published him. Why would they publish him? The New York Times yes. But the Wall Street Journal. Why? 

He is supposed to be an intelligent economist, yet he continues to spread the big lie that it will cost nothing to pass the latest liberal spending and taxation bonanza. You would think that he is on the Democratic Party payroll. Or maybe he is running for office with Biden. I have no idea why he writes this stuff. 

Since when do economists say that things cost nothing? One of the biggest increases in spending ever yes, but he says it will cost nothing. How can you say that? Trillions of dollars of spending will appear out of a hat? Of course it will cost something. 

Since when are higher taxes neutral to the economy? He admits that corporations and the rich will pay for all those trillions in extra spending. Okay, he doesn't like those folks and loves to add to their tax bills. But are those people so dumb that they will send the extra trillions to the government and not change any of their behaviors? Will firms continue to hire? Will they continue to expand their spending on equipment and other capital? Will they give the workforce a big pay increase? Or will they maybe find clever ways to not pay this huge tax bill? 

What macro course does Blinder teach at Princeton where he tells the students that you can raise taxes by trillions of dollars to afford that much more spending and it will have no impacts? In what economics course does he teach students that extra spending is free? I never taught those ideas but then I am not a rich and famous economist from the Ivy League. 

Okay put aside the free idea. What about his total acceptance that the extra government spending will be done wisely and will result in society's ills being addressed and solved? Sure it's a lot of money he admits, but in a few years from now we will have solved poverty, invested in a huge defense buildup to scare Russia and China, solved the puzzle of productivity, increased employment while reducing inflation, and basically solved all of our problems. 

If you believe all that, I have a very nice 2014 Hyundai Santa Fe I am willing to sell you. Those and other problems have been persistently stubborn over the decades. Have we really figured out how to solve problems associated with income inequality? Trust Alan Blinder -- this time, if you give Washington DC enough money, they will finally put all these negative trends to rest. Hurrah Alan. 

I hate to sound so mean and small. But this guy is whistling his way to the bank. I hate to spend our precious time even bringing up these points. But you gotta do what you gotta do. Folks, it has always made sense to watch your spending and debt. Nothing has changed. 

Read his article if you think I am exaggerating.  

* https://www.wsj.com/articles/look-at-build-back-betters-benefits-not-price-tag-federal-budget-bbb-reconciliation-debt-cbo-11638718325?mod=opinion_major_pos4

Fedspeak and Gobbledygook

Two scenarios. In each scenario, Pete told Charlie not to mess with his golf bag. Charlie then messed with Pete's bag.

    Scenario 1: Pete slugs Charlie

    Scenario 2: Pete tells Charlie that he is thinking about someday maybe retaliating in some way against Charlie. 

These scenarios remind me of the Fed and its current plans to retaliate against the hated onslaught of inflation. Keep in mind that inflation has already picked up. The rise in inflation is not probable nor off in the future. It is here and now. 

The Fed reminds me of the parent who threatens and threatens his child but never follows through. The Fed shows it true colors with gobbledygook. The Fed does NOT want to do anything about inflation until it is forced into it kicking and screaming. Meanwhile it resorts to gooledygook.

Below -- in italics below are quotes from an article* published in the WSJ on December 15. Following each quote I comment. The bottom line for all this nonsense is that the Fed cannot be trusted to do one damn thing about inflation. 

The Federal Reserve set the stage for a series of interest rate increases beginning next spring, completing a major policy pivot that showed much greater concern about the potential for inflation to stay high.

     Setting the stage for a future pivot is not an action, is not a date, and shows nothing about concern. A major policy pivot is a glittering generality and not a specific policy action.

The Fed penciled in at least three quarter-percentage-point rate increases next year. 

   Penciled in is not a decision. Notice that the policy changes are indicated for next year. Inflation is a problem now and they are talking about a policy "sometime next year". Are they going to let inflation get rolling for a few months and then get serious about it?

For months, Fed leaders had stuck to a view that higher price pressures this year were caused primarily by supply-chain bottlenecks and would ease on their own. But Fed Chairman Jerome Powell had in recent weeks signaled much less conviction about that forecast, and the projections Wednesday suggest most of his colleagues share his concern.

     Notice this speaks of projections at the meeting. Projections are not a policy or a policy change. Inflation is here and now. Projections underlie real policy changes when? His colleagues are concerned. What does that mean? I'm concerned about global warming but I don't do anything about it. 

They approved plans that will more quickly scale back their Covid-19 pandemic stimulus efforts, ending a program of asset purchases by March instead of June. That opens the door for them to start raising rates at their second scheduled meeting next year, in mid-March.

     Opens the door? Scaling back? This is like you saying that the doctor ordered you to lose weight to prevent a heart attack, so you have decided to schedule a gain of only 10 pounds next month instead of 15. In the old days, the policy would not have planned to scale back purchases. It would have instigated asset sales. That would be a real policy to fight inflation. 

“There’s a real risk now, I believe, that inflation may be more persistent and…the risk of higher inflation becoming entrenched has increased,” said Mr. Powell at a news conference Wednesday afternoon. “That’s part of the reason behind our move today, is to put ourselves in a position to be able to deal with that risk.”

     He clearly says there is a real inflation risk now. The risk is not next March. The risk is right now. Does he deal with it now? No. He wants to put himself in a position. Wow. Now that's action. Putting himself in a position. 

Fed officials in early November agreed to reduce their then-$120 billion-a-month in bond purchases by $15 billion a month, to $90 billion this month. On Wednesday, officials said they would accelerate that wind-down beginning next month, reducing purchases by $30 billion a month. As a result, they will purchase $60 billion in Treasury and mortgage securities in January, putting the program on track to end by March.

      Now Powell is getting specific. But note. The math says that monetary policy is going to keep injecting money. They should be removing money. There are mountains of money out there. Yet he is clear he wants even more.....by $90 million more this month and finally turning off the money hose in March of 2022. March! That's three months from now. If inflation is a real risk today, why does it take so long to get back into neutral? 

For the first time since the Fed slashed rates to near zero when the pandemic hit the U.S. in March 2020, Mr. Powell said nothing to dispel expectations that officials could be contemplating rate rises in the next few months.

“We’ll be in a position to raise interest rates as and when we think it’s appropriate,” he said. 

“And we will, to the extent that’s appropriate.”

      Those above three quotes are about the Fed's policy to raise interest rates. The first one says Powell said nothing to dispel rate rise expectations. Dispel? Why not say it? We are going to raise rates. The second two quotes add words -- "we will be in a position". What does that mean? Is he going to move from outfield to infield? What does "when appropriate" mean? 

Summary: Obfuscation. Gobbledygook. Stop inflation now before it is too late. 

https://www.wsj.com/articles/fed-officials-project-three-rate-rises-next-year-and-accelerate-wind-down-of-stimulus-11639594785?mod=hp_lead_pos1

Worst Inflation Ever?

The November 2021 CPI announcement created quite a stir. But as usual, the press had to shriek rather than analyze. What I witnessed was a press screaming that inflation in November reached a number so high that even Snoop Dog has never been that high. The press swooned that inflation had not been so high in decades and decades. 

The actual number for CPI inflation in November amounted to a change of 6.81% from November of 2020 to November of 2021. For those of you who remember or who have read about the 1970s, we would have appreciated a rate of 6.81% but that was then and this is now. 6.81% in November of 2021 is not what we want. 

What most of us don't know and we are still discussing is whether or not that number is temporary and fleeting or whether it is a bell weather of what is to come. My crystal ball is at the dry cleaners now so I won't be able to tell you which is which. I will take a guess below. 

But I can request that we back up a bit and examine what is really going on with the numbers. Should we be hysterical about this 6.81%? If you returned from a vacation to another planet recently you might be surprised by the increases in debt by our government and the extent to which the Fed has monetized all that debt. Inflation would not surprise you after all that. And then when you learned about the supply constraints caused by Mr. Covid, you would appreciate why inflation might be rising faster than Elon Musk in his newest rocket ship. 

The CPI is a number that represents the average price of the things we buy -- both goods and services. The BLS sends out a bunch of munchkins every month and they figure out how much all that crap costs in that month. Everything from lettuce to Lexus is counted. Pretty big task, eh. But they do it every month and they publish a number for that month. We call that the CPI value. We now have one for November of 2021.

Inflation is a word that defines how much that CPI level changes over time. We can calculate the percentage change of the CPI from October to November of 2021. That would represent inflation over the period of one month. We can also take the percentage change from November of 2020 to November of 2021. We call that the annual inflation rate. That is what came in at 6.81%. Wow. That's pretty impressive and the press is right to say that 6.81% for a whole year was a real zinger. 

But hold on. This way of calculating an inflation rate from November of one year to November of the next year only uses two months in the calculation. What about the other months? Don't they matter too? And doesn't this method emphasize those two months too much? 

Yep. that's very true. Luckily we have another way to calculate an ANNUAL inflation rate. If we average the one month rates for all 12 months between December of one year and November of the next one, we get an annual average that reflects all those months -- not just two months! If you do it this way., you find that the annual rate was about 4.5%. 

What can we compare that 4.5% to? You could compare it to the average over 2012 to 2019. That pre-Covid inflation rate amounted to about 1.6% per year. During those 8 years the annual inflation rate was as low as zero percent in 2015 and was mostly lingering around 2% in most years. 

What do you think about the average inflation rate of 4.5% over the past year? It is definitely higher than the Pre-Covid inflation rate of 1.6% and it is definitely higher than the 2% we saw in a lot of years recently. It is clearly not the 6.8% the press is swooning about. 

I suspect that given monetary and fiscal policy and given somewhat lingering supply shortages, inflation is not going to improve very much very soon. The supply shortages should dissipate but if our government does not remove the stimulus from their policies soon, 4.5% might herald a return to the 1970s. But today the 4.5% is more a warning than it is a tragedy. 

The Myth of Scarce Workers

Note: after publishing this post I found that the numbers I quoted were in error. I was lazy and got the numbers from a third-party data source I thought was reliable. While US employment is rising, it has not returned to levels reached before Covid. Before Covid employment was about 152 million. As of this November, the number was approximately 149 million or 3 million below the previous peak. 

I wanted to write something about productivity in the USA. Productivity -- or labor productivity -- is calculated using two national figures -- employment and output. Dividing output by employment tells you how much output we can get from a given amount of labor input. When that division increases, we interpret it to mean that a given amount of employment can now produce more output -- ie, we conclude that labor productivity has increased. 

But on the way to productivity I started looking harder at the employment numbers. They seemed to be  screaming at me for attention. So for now, I a going to focus on employment at the national level in USA. I acknowledge that Florida or New York or Port Townsend might deviate from the national figures. But today we focus only on the whole country. 

Why was the data screaming? Because, as often happens, the press or the politicians so misread the situation that it screams for myth correction. Watching your TV or the Internet you might think that firms cannot find workers. They fabricate this picture of firm after firm not being able to find workers. You will, therefore, have to wait in line a long time for your pizza or semi-conductor order to arrive. Covid-induced supply bottlenecks are often blamed but story after weepy story proclaims we have an enormous employment problem. 

Maybe the Bureau of Labor Statistics hates the press or maybe they are mistaken, but if you go to bls.com and download national employment numbers you will be blown away. It is true that employment was dragged down by Covid and interplanetary visitors in 2020, but we are almost to 2022 and we need to focus on post-Covid numbers.

In October of 2020, US payroll employment was 149.7 million jobs. In October of 2021, a year later,  the employment number increased by 4.4 million jobs to a total of 154 million people employed according to payroll statistics for the business sector. That was an increase of 2.9%. Hmm....it seems that firms were finding new employees. Hmm...maybe some firms were not finding employees but if you look at the nation, that's a lot of workers finding jobs. 

It is true that employment bottomed out in 2020 at 142.2 million jobs. But that was then. How does the current figure of 154 million compare to history?

Interesting, the 154 million figure for October of 2021 is the highest on record. It represents a snapback from the recession but it also represents the highest employment level on record for the USA.

2019  150.9 million

2009  131.3 million

1999  129.2 million

Should I go on? 

How is it possible that today's handwringers can know this data and still say the things they say and write the things they write about employment? 

My answer? They don't care about the data. They care about stories. They care about stories that make you want to cry and open your pocketbook or your rich friend's pocketbook to help solve a problem that doesn't really exist. 

Are some people unemployed? Are some companies not finding workers? Of course. Those people always exist. Is this problem huge or huger? I will let you convince me otherwise. But please, don't tell me about one grocery store that you personally know that can't find people to bag your groceries. 

Maybe next week I will turn to national productivity.